Mortgage Rates Spike Again Despite Fed’s Rate Cut
So, here’s what’s happening — mortgage rates have once again jumped higher, and the twist is that this happened right after the Federal Reserve announced a rate cut. That sounds backwards, right? A lot of people assume that when the Fed cuts rates, mortgage rates will drop too. But this time, the opposite happened — and it’s actually something analysts have been warning about for a while.
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On Wednesday, the average 30-year fixed mortgage rate climbed to 6.27% , which is a 0.14% jump in a single day — the sharpest rise since the last Fed meeting. Meanwhile, 15-year rates also crept up to 5.82% . That’s a big move in a short time, and it shows just how sensitive the mortgage market is to changes in investor expectations rather than the Fed’s official actions.
Here’s why this happens. The Fed’s rate cuts mostly affect short-term borrowing costs, not directly the long-term mortgage rates. Mortgage rates, instead, are heavily influenced by what investors think will happen next — especially when it comes to inflation and the economy’s direction. So, when Fed Chair Jerome Powell suggested that another rate cut in December wasn’t guaranteed, the markets quickly read that as a sign the Fed might not be as dovish as expected. Bond yields reacted almost immediately, and since mortgage rates follow those bond yields, they went up too.
In short, it’s not the rate cut itself that moves mortgage rates — it’s what the market thinks will happen afterward. And right now, those expectations are shifting fast.
Even with this latest spike, rates are still slightly below the highs we saw last year when 30-year mortgages flirted with 8% . But they remain far from the ultra-low sub-3% rates people enjoyed during the pandemic. For many Americans, that difference has made homeownership feel out of reach. Home prices have risen by more than 50% since 2020, and wages just haven’t kept up.
Economists from places like Zillow and Berkshire Hathaway HomeServices have pointed out that rates would need to drop to around 4.4% for homes to feel affordable again — a number that looks unrealistic right now. And because so many homeowners are locked into older, cheaper mortgages, they’re reluctant to sell, worsening the housing shortage.
So, while the Fed might be trying to cool the economy, the housing market remains stuck between high rates and high prices. The paradox continues — even as the Fed cuts rates, mortgages aren’t getting any cheaper, and the dream of homeownership keeps slipping further away for many.
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